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San Juan Capistrano

Council Seeks to Refund Water Overcharges
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SJC Councilman John Perry

by San Juan Capistrano Councilman John Perry

Now that the City Council has settled with the Capistrano Taxpayers Association (CTA), all that remains to close out the lawsuit is to refund to City residents the illegally collected water rates. The City Council must now adopt a procedure for the residents to file a claim and receive their refund in a fair and timely manner.

The first part of the equation is to determine if the court itself agreed with the CTA that all Tiers above Tier 1 were illegal because the city could not provide evidence that the Tiers were based on actual costs of service. To do this we must refer to the court’s final Statement of Decision and Judgment.

Now that the City Council has settled with the Capistrano Taxpayers Association (CTA), all that remains to close out the lawsuit is to refund to City residents the illegally collected water rates. The City Council must now adopt a procedure for the residents to file a claim and receive their refund in a fair and timely manner.

The trial court decision was issued on August 28, 2013 and signed by OC Superior Court Judge Gregory Munoz. On page 3 of the decision Judge Munoz stated, “CTA has no quarrel with respect to the new rates (February 2010) under Tier One, but argues that in substantially raising the water rates under Tiers 2, 3, and 4, the City failed to provide any evidence to justify the new rates as required by Proposition 218.”

The Judge went on to write, “This Court finds that the City failed to carry its burden of proof of establishing that the rate increases were proportional to the costs of providing water services to its customers.”The Court issued a writ of mandate ordering the City, “to abandon City’s current Water Rate Structure and base all rates on cost of service in conformance with the California Constitution Article XIID.” The Court also provided a Judgment “preventing the City and each of its agents, employees, representatives, officers, directors, and all persons act in concert with it from imposing billing or collecting water charges/fees (effective February 2010) as currently being imposed, in violation of the California Constitution, Article XIIID.”

In September 2013, the City Council majority of Sam Allevato, John Taylor and Larry Kramer voted to appeal the Trial Court decision and its judgment to the Fourth District Court of Appeals. This appeal caused the Judgment Order of Judge Munoz to be delayed pending outcome of the Appellant Court. The City Council was warned by the CTA that if the appeal failed, the City would be liable for refund of all funds for the water rates determined by the Munoz Court to be illegal however; the City Council ignored the warning and continued to bill the illegal rates in violation of the Trial Court Judgment. This decision by the 2013 City Council will turn out to be very costly to the City. Attorney fees for the appeal will cost the City over one million dollars and the refunds for the appeal period will total three million dollars or more.

On April 20, 2015, the Fourth Appellate Court issued its Opinion finding, “…the Trial Court did not err in ruling that Proposition 218 requires public water agencies to calculate the actual costs of providing water at various levels of usage. Accordingly, the trial court correctly determined the agency (City) had failed to carry the burden imposed on it by another part of Proposition 218 showing it had complied with the requirement water fees cannot exceed the cost of service attributable to a parcel. That part of the Judgment is affirmed.” The Court went on to say, “…the respondent CTA quickly ascertained the difference between Tier 1 and Tier 2 is a tidy 1/3 extra, the difference between Tier 2 and 3 is a similarly exact ½ extra and between Tier 3 and 4 is precisely 5/6 extra. This fractional precision suggested to us that the City did not attempt to correlate its rates with cost of service. This conclusion was confirmed at oral argument in this court when City Water [Department] acknowledged it had not even tried to correlate the incremental cost of providing service at the various incremental tier levels to the process of water at those levels.”
In other words, both Court Decisions concluded that Tier 2, 3 and 4 were not based on actual cost of service and are therefore illegal under Proposition 218. It is also clear that the refund period should be based on the period August 28, 2013 when the trial court decision and judgment was issued, to when the new water rates were implemented on July 1, 2014.

At the June 6, 2015 City Council meeting, the Council voted to refund Tiers 2 through 4 for a period from August 28 through July 1, 2015. I voted against the motion because the City wanted to calculate a new value for Tier 1. I believe each ratepayer should get every penny illegally overcharged by the City. Therefore, I was pleased that the council majority voted on June 16 to adopt the Tier 1 rates, as shown on your water bill.

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